Cuban President Raul Castro said Sunday that his government will scale back controls on small businesses, lay off unnecessary workers and allow more self-employment — significant steps in a country where the state dominates nearly every facet of the economy.

Cuban President Raul Castro attends a session of the National Assembly of Popular Power in Havana on Sunday. The empty seat belongs to his brother Fidel. (Javier Galeano/Associated Press)However, Castro quashed notions of a sweeping overhaul to Cuba's communist economic system in response to the financial crisis it faces.

"With experience accumulated in more than 55 years of revolutionary struggle, it doesn't seem like we're doing too badly, nor that desperation or frustration have been our companions along the way," he said.

Castro spoke before parliament, which opened its biannual session without Fidel Castro, who has made a slew of recent public appearances of late but missed another chance to share a major public stage with his younger brother.

Instead, lawmakers got Raul Castro, who said authorities will "update the Cuban economic model," suggesting reforms could be on the horizon. Cuban officials plan to reduce state control of small businesses, authorize more Cubans to become self-employed and build a new tax structure that will compel state employees to contribute more.

About 95 per cent of all Cubans currently work for the government and Raul Castro has suggested that as many as one in five state employees are redundant. He promised job cuts, calling for "the reduction of work forces that are considerably bloated in the state sector."

The president said those left out of work would be retrained or reassigned so as not to stay unemployed, but also warned that few sectors would be immune to job cuts.

The president's announcements were similar to comments before the session began by Economy Minister Marino Murillo, who spoke to reporters about a pilot program that has turned some state barber shops over to their employees and let them set their own prices while paying rent.

Murillo said such projects would be extended to other sectors of the economy, adding that "we are of the belief that the state has to step back on certain activities."

Former Cuban leader Fidel Castro passed up Sunday's opening of the biannual session of parliament, instead meeting with Chinese Foreign Minister Yang Jiechi, left, in Havana. (Cubadebate, Roberto Chile/Associated Press)He also said that allowing outright private ownership was out of the question, however.

"We can't call them reforms. We are studying a modification of the Cuban economic model," Murillo said. He added that officials will ensure that "the values of socialism come first, not the market."

"We will continue following centralized planning," he said, "but we will loosen up on a group of things."

Raul Castro made only limited references to his brother Fidel, who stepped down four years ago after undergoing emergency intestinal surgery.

Fidel Castro remains a member of parliament, but his chair to the right of Raul Castro was empty Sunday. Instead of attending the session, he met with Chinese Foreign Minister Yang Jiechi.

Debate has intensified outside Cuba over who is guiding major government policy following the sudden media blitz by Fidel Castro, who had almost completely disappeared from public view until recently.